At the start of each business day, organizations face any number of challenges: to drive innovation, to launch new products, to improve product quality, to create more value for their customers, to develop new markets, to strategically manage human capital, and ultimately, to increase shareholder value. As a result, a typical business database today contains an enormous amount of data in multiple dimensions, presenting a problem for decision makers to acquire and understand relevant business information or “business intelligence data” in a simplified and timely manner.
The entire employee base in an organization must make the decisions that respond to these strategic challenges. And they must make these decisions in a business climate driven by sudden economic or market shifts.
Historically, the metrics that have been used to support these decisions have been financial. Yet a complex business climate demands information that goes beyond financial metrics. It demands forward-looking, or “leading” metrics that can be integrated into a comprehensive performance management environment that can drive future value.
Until now, it has been difficult for companies to move beyond financial metrics to a performance management environment. One of the biggest challenges has been consolidating corporate performance data from disparate sources into centralized, coherent, and trust. Many companies rely on performance data drawn from many different systems: ERP, CRM financial spreadsheets, flat data files, data marts, presentation software, and other sources. Each system provides important information about a particular aspect of the company's performance, but each collects, defines, and displays the information in a different way.
Decision-makers devote great amounts of time, energy, and resources trying to consolidate this data to under-stand and report on their performance. What they often discover in doing this is that their peers have consolidated the data in different ways, each according to their own interpretation of the strategy. Metrics are incomplete, conflicting, or limited to a particular department or function. Sometimes they are all three. Other than key financial metrics (which are well-known and well-defined), decision-makers struggle to obtain a consolidated understanding of performance against corporate strategies and targets.
In these situations, decision-makers often spend more time discussing the validity of numbers than solving performance issues. Without a performance management system that provides a single, unified and consistently defined view of their performance, decision-makers have a great deal of difficulty understanding how the company is performing and have little opportunity to collaborate for effective decision-making.
It has been shown that a company's financial metrics reflected the cumulative effects of only a small proportion of the decisions made within that company, and that its true value could be more accurately evaluated and increased by measuring the effect of decisions made at every level and throughout the company. They asserted that it was in the interplay of people, processes, and other intangible assets that the next competitive advantage was to be found. To understand, measure, and leverage the value of this new competitive advantage, they envisioned a new class of metrics that would quantify the value created by the many processes that take place within and across an organization.
The common problem that many organizations face is the inherent difficulty in linking their strategy, people, and performance through a unified metrics framework. Unfortunately, this is a problem whose size and complexity grows in tandem with the organization: the larger or more geographically diverse the company, the greater the gap between strategy and execution.
Another problem for many organizations is the difficulty they face in combining their disparate data assets into a single reference point. In most cases, an organization will base its decisions on Key Performance Indicators (KPIs) that draw data from different sources: ERP systems, financial spreadsheets, CRM software, and others. Not only do these different systems report on performance in different areas, the data they collect may not be collected, shared or defined in a consistent way across the company.
Without a shared performance management system with an agreed-to set of metrics, each department may suggest different priorities or provide different answers to the same question. For example: falling revenue from a particular vertical market may lead to widely divergent views on the best course of action: better training for the sales team, hiring more sales people; improving marketing, developing a new product, or discounting the current product.
This problem can also arise when a company lacks a standardized, commonly agreed-upon definition of its key reports, or when a particular metric is measured in different ways across the company. Different managers may use different metrics. Its executives use different key reports that may measure things related to the corporate strategy, but their relative importance and their relationship to other reports is not centrally defined.
A third problem occurs primarily when companies try to respond to severe, abrupt, or unexpected changes in market conditions. Should a company need to change its priorities, for example, from margins to customer service, or from acquisitions to cost-reductions, it will need to make operational changes within and across each functional area. Quite often, these changes tend to be short-term; as such, companies need to quickly understand how its processes operate and how they need to be altered. A company in this situation also needs metrics that can be updated frequently to let its decision-makers evaluate and re-evaluate their progress against new priorities at a faster pace. The company's performance management system needs to support these shifts in performance focus without needing to be re-wired.
Existing methods of providing business intelligence data deliver static reports on a predetermined schedule, typically containing an unwieldy jumble of data the vast majority of which is superfluous. Furthermore, because these reports are provided on a schedule insensitive to individual need and ignorant of real-time requirements, information often arrives too late to be useful. It would be advantageous to provide user-customizable business intelligence reports.
For the foregoing reasons, there is a need for an improved method of monitoring business intelligence data, linking strategy, people, and performance through a unified metrics framework, responding to sudden changes in business environment.